Late Acceptance of Part 36 Offers and Costs Assessment: Holmes v West London Mental Health Trust (2018)

In the recent unreported High Court case of Holmes v West London Mental Health Trust (2018), a claimant was successful in obtaining indemnity costs against a defendant, which accepted a Part 36 Offer 15 months after it was made.[i]

The claimant brought a claim for clinical negligence against the defendant Health Trust.

The claimant subsequently made a Part 36 Offer for 95% of the full value of claim in February 2017. On 30 May 2018, 15 months later, the defendant accepted the unwithdrawn Offer, in accordance with CPR 36.11(2).

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Acceptance was given by the defendant on the condition that the claimant’s legal costs would be awarded on the standard basis.

However, the claimant contended that the delay between offer and acceptance and the incurrence of significant costs during that period should result in the receipt of costs assessed on the indemnity basis, from 21 days after the Offer was made.

His Honour Judge Gore QC considered the appropriate liability for costs, under CPR 36.13(4) and (5), as the parties to litigation could not agree.

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In doing so, he considered the extent of the Court’s discretion, pursuant to CPR 44.2(4) and (5):

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Before making reference to leading case authority on orders for indemnity costs, HHJ Gore QC commented, at paragraph 27:

‘… it is a little difficult to characterise the conduct of the defendant as reasonable pursuit of a defence when it eventually capitulates by acceptance of the claimant’s offer of 95% of the full liability value of the claim’.

The judge went on to cite paragraph 19 of Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson and Ors [2002] EWCA Civ 879, in which the then Lord Chief Justice ruled:

‘… if the court is going to make an order for indemnity costs, as it can in a case where Part 36.20 applies, it should do so on the assumption that there must be some circumstance which justifies such an order being made … there must be some conduct or (I add) some circumstance which takes the case out of the norm’

In the same case, Waller LJ added that if ‘all that was relied upon is the failure to accept a reasonable offer’ the threshold for the appropriateness of indemnity costs would be high. 

However, HHJ Gore QC, in Holmes, reasoned that indemnity costs do not entitle the receiving party to any more than reasonably incurred, proportionate costs. The indemnity basis ‘only has the effect of reversing the burden, shifting it from the claimant to satisfy those criteria to the defendant to show non-satisfaction’.

Taking into account all the circumstances of the case and the whole conduct of litigation, the judge reached his decision that the defendant’s conduct was ‘out of the norm’. He went on to explain that ‘the norm’ refers to ‘how litigation should normally be conducted’. As such, ‘simply because a litigation history is ‘sadly commonplace’ … does not mean that that was the relevant ‘norm’’.

Accordingly, HHJ Gore QC made the following ruling, at paragraph 41:

‘… there will be, by consent, judgment for the claimant for 95% of the full liability value of the claim to be assessed.  Not by consent the defendant will be ordered to pay the claimant’s costs of the action to date, on the standard basis to the end of the relevant date for acceptance and thereafter on the indemnity basis to date’.

Full text judgment can be accessed here.

 

[i] Woman who was prescribed lithium receives judgment and her indemnity costs (30 July 2018 Leigh Day) <https://www.leighday.co.uk/News/News-2018/July-2018/Woman-who-was-prescribed-lithium-receives-judgment> accessed 10 September 2018.